Let Them Eat Marketing!

Breakfast cereal is a classic corporate capitalist product. Nutritionally speaking, it’s a loaf of bread — at best. Financially speaking, it’s a mega-processed, highly manipulable and marketable product that shoves bread aside, so that corporate investors can greatly expand the “gross margins” they make on people’s breakfasts.

Exactly how they achieve that latter end is carefully concealed from the public, of course.

The latest case is quite telling, as it’s apparently becoming a widely-emulated maneuver as the US economy spins down into recession or depression.

This is the “Right Size, Right Price” marketing scheme being conducted by the General Mills foodstuff oligopoly.

Presented to shoppers as having something to do with not over-buying and over-eating, the real point of the campaign was pure capitalism — to charge more money for less stuff.

Last year, Forbes Market Scan reported:

Wall Street fretted General Mills’ strategy of packing less cereal into smaller boxes would irritate customers, but the breakfast club apparently hasn’t noticed the shrinking packaging.

BMO Capital Markets analyst Kenneth Zaslow said a survey of 72 supermarkets indicated that the General Mills’ “Right Size, Right Price” initiative is off to a better-than-expected start. Zaslow upgraded the company to “outperform,” from “market perform,” on Monday.

General Mills announced in June it would sell its cereals in smaller boxes but at similar prices. The move allows the company to charge more per-ounce as ingredient prices rise. General Mills cereals include Cheerios, Wheaties, and Total.

Now comes words from Advertising Age that the good start has gotten even better:

General Mills reported impressive fourth-quarter and full-year earnings this morning, citing increased marketing spending and the company’s “right size, right price” initiative. Net sales and net earnings for the full year were up double digits.

Fourth-quarter marketing spending grew 20% over the year-earlier period, up 13% for the full fiscal year. General Mills credited its higher marketing outlay for its impressive third quarter, reported in March, saying at the time that spending during the period grew 13% over the year-earlier quarter.

For the fiscal year ended May 25, General Mills’ net sales were up 10 % to $13.7 billion. Net earnings jumped 13% to $1.3 billion.

So, as General Mills shareholders laugh their way to the bank, what are cereal eaters getting in these tough times? More of the same:

“We believe our opportunities to generate continuing growth and increasing returns are excellent,” General Mills CEO Ken Powell said during a conference with analysts. In a research note, UBS analyst David Palmer praised the company’s “solid performance in every division” and “solid earnings” in spite of restructuring charges and steep marketing increases.

“We believe that strong brand support is a key driver of net sales growth overall,” said Ian Friendly, chief operating officer of U.S. retail at General Mills. He added that Big G cereal sales grew faster than the ready-to-eat cereal market as a whole, led by Cheerios, which as a whole grew 8% in sales over the previous year. While Cheerios sales were up 7% for the year, Honey Nut Cheerios sales grew 12% and MultiGrain Cheerios jumped 14%.

Mr. Friendly said a successful ad campaign for MultiGrain Cheerios in Canada highlighting its weight-management potential inspired the company to put similar spots on air in the U.S. in January. The commercials boosted sales, Mr. Friendly said, and a bigger push is in the works for fiscal 2009.